US Dollar Surges, Boosted By Sales Data And Rising Bond Yields

Dollar near 5-month high after benchmark Treasury yield soars above 3 pct

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The uptick in USA yields unnerved equity markets and sent Wall Street shares significantly lower on Tuesday.

The U.S. dollar rallied against a basket of major currencies on Tuesday to its highest since December, helped by a rise in U.S. Treasury yields and as data showed U.S. retail sales increased moderately in April.

Contracts for the S&P 500, Dow Jones and Nasdaq were all directionless as the Stoxx Europe 600 Index drifted.

Equity futures in Japan, Australia and Hong Kong were lower after USA stocks halted a four-day rally with the steepest slide in nearly two weeks.

"A little bit of today's jitters are related to a hangover to yesterday's wrongly placed exuberance that a trade deal was imminent and the reality is we are in for a long slugfest between the USA and China", Mackay said.

Oil prices hovered around multi-year highs, supported by concerns that US sanctions on Iran are likely to restrict crude oil exports from one of the biggest producers in the Middle East.

North Korea's possible cancellation of a June 12 summit in Singapore added to geopolitical worries for financial markets, given it could see tensions on the Korean peninsula flare up again and damage US-China efforts to resolve an ongoing trade dispute. In emerging-markets, equities dropped the most since March and currencies slumped the most in a year. The Malaysian ringgit fell for a sixth day after overseas investors pulled out a net $376 million from stocks over Monday and Tuesday in the wake of last week's election.

"The broader risk for the region if talks do break down is that Trump no longer feels the need to keep China on side and could escalate trade tensions again".

USA industrial production numbers are due this week.

The pan-European FTSEurofirst 300 index edged up 0.17 percent. NY time, the highest in nearly 15 weeks.

MSCI (Frankfurt: 3HM.F - news) 's gauge of stocks across the globe shed 0.90 percent.

"The resurgent tone for the USA dollar is largely due to, number one, the move higher in Treasury bond yields across the curve and number two, the relatively solid data we saw on retail sales", said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange Inc in Washington D.C.

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Hang Seng Index futures declined 0.4 percent.

The MSCI Emerging Market Index was unchanged at the lowest in a week.

Benchmark 10-year notes last fell 17/32 in price to yield 3.0576 percent, from 2.995 percent late on Monday. Against the yen, the dollar was up 0.57 percent at 110.27 yen, its strongest since early February.

The euro fell to a fresh 2018 low of 1.1821, after weaker-than-expected economic growth in Germany.

The pound was a shade weaker at $1.3499 after slipping to $1.3452 on Tuesday, its lowest since December 29.

The yield on 10-year Treasuries decreased one basis point to 3.06 percent.

The MSCI Emerging Market Index declined 1.7 percent, the first retreat in more than a week and the biggest tumble in nearly seven weeks.

Britain's 10-year yield dipped two basis points to 1.493 percent.

Elsewhere, the 10-year yield slipped to 3.057%.

West Texas Intermediate crude dipped 0.3 percent to $71.12 a barrel. Gold fell below $1,300 an ounce for the first time since December and the yen dropped.

Iron ore declined 0.5 percent to 485 yuan per metric ton.

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-With assistance from Ruth Carson and Andreea Papuc.

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